Sustainable cocoa isn't all it seems

The movement to certify cocoa has taken two steps forward in recent months. Consider these two stories:

1. Mars, which is the world's largest end-user buyer of cocoa, has promised to certify that all its cocoa will come from sustainable sources by 2020. Unfortunately, this article from the Financial Times does not tell us what a 'sustainable source' is, how it will be certified or why it will take over 10 years to complete the process. However, they do hint at the root of the problems of the cocoa sector: very low yields in West Africa, where two-thirds of the world's cocoa comes from. Mars seems to understand that since there is little primary forest left to cut down in Ghana or Côte d'Ivoire, the only way to increase cocoa production is to apply inputs to existing trees and replant them with higher-yielding varieties.

2. Cadbury, the UK's best-selling chocolate maker, has announced all its Dairy Milk bars will be certified 'Fair Trade' by the middle of 2009. The BBC reports this will mean tripling the volume of Fair Trade cocoa it buys from Ghana, to 15,000 tonnes. The more detailed press release points out that they are no longer relying just on Ghana's well-established 'Kuapa Kokoo' cooperative, but will help set up farmers' groups and cooperatives in other parts of the country.

Both Mars and Cadbury promise that chocolate prices won't rise, while promising higher farmgate prices for the cocoa growers. How can they do this without squeezing their profit margins? I can think of two ways. First, certified cocoa has been expensive in the past because it was a niche product. If certification becomes the standard, the economies of scale may make it cheaper to operate the tracing systems, audits and inspections required for certification. Two, Fair Trade (which Cadbury backs, but Mars doesn't) guarantees a minimum price to farmers, but when cocoa prices are as high as they are now, there is no difference between Fair Trade and the world market price. (There is a small 'bonus' for Fair Trade growers, but it's tiny and usually given to the cooperative for community projects, rather than individual farmers).

Will these schemes help cocoa farmers, then? I'd like to see more details of what Mars is planning, but there are some benefits. If certification works, it will make the supply chain more efficient and thus cut out some of the profits made by middlemen. If Fair Trade works, it will reduce the risk of a sudden crash in cocoa prices leaving farmers worse off. Neither of these schemes will do much to reduce poverty in cocoa-growing communities, however. To increase their income, they will need to raise productivity. Higher productivity will come from growing more and better cocoa on the same land, with higher-yielding trees and more inputs including fertiliser (sorry). You can do this through subsidised credit and government- or private-sector led replanting schemes; certification and higher prices alone will not be enough.

Cocoa prices hit a 'record high' - or do they?

The Financial Times reports a sudden increase in the cocoa price, as bad weather and black pod disease lead to lower-than-expected deliveries to ports in Cote d'Ivoire. Good news for cocoa farmers, if the price spike is passed onto them. My concern is, it won't be - the traders will take a profit and the underlying conditions that led to the price spike will return. In the medium term, prices are likely to fall anyway, as global demand for chocolate (and especially high-quality chocolate, such as that coming from Latin America and Ghana) flattens after years of steady increases. (See this from the same paper).

Viewed over the last 15 years, the current price of £1,820 per tonne certainly looks impressive:

















However, the current price may be less impressive than it looks, for two reasons. First, this chart reveals a similar spike in 2002 (presumably a result of the civil war in Côte d'Ivoire) that was followed by a 50% drop in prices and a 5-year slump. That would now equate to a price of around £900. Second, cocoa futures are priced in pounds, but the biggest cocoa producers and consumers use euros. Since the pound's value has declined from around €1.40 a year ago to €1.10 today, a cocoa price of £1,800 today is equivalent to around £1,400 a year ago - namely €2,000. The effective export price in Côte d'Ivoire, whose currency is tied to the euro, is some 10%-15% lower now than in July, when cocoa prices peaked at £1,700 (then €2,200 or $3,000).

In the meantime, what might be the effect of cocoa prices on the second round of Ghana's presidential elections, scheduled for 28 December? Probably very little, since the Cocobod fixed its annual price in August. But with only a percentage point between the two candidates, small psychological factors could make the difference. To all friends in Ghana and friends of Ghana, I wish you a peaceful Christmas and an even more peaceful election.

What's in a national motto?

To the best of my knowledge, only Brazil and Saudi Arabia have a national motto (or whatever you want to call it) on their national flag. Many more have a motto on their official coat of arms, though and from there, it frequently gets onto passports, official documents and the currency.

So how does the motto get chosen? And what does that choice say about a country?

I suppose most mottos are chosen at independence, so the leaders of the nationalist or revolutionary movements are probably important. But can we learn about a country's history from a motto? Or, especially in Africa, the personality of its first President or 'founding father'?

Compare these two, for example:
"Unité-discipline-travail" (unity-discipline-work)
"Unité-progres-justice" (unity-progress-justice)

The first is Côte d'Ivoire: serious, conservative, in keeping with President Houphoët's non-revolutionary ideology. The second is its neighbour Burkina Faso: superficially similar (and following France's lead by doing things in threes) but more progressive-sounding, more socialist maybe, with a revolutionary tinge. Coincidence?

I don't think so. When Burkina Faso was Upper Volta, its motto was actually "Unité-discipline-justice". When Thomas Sankara renamed it 'The Land of Upright People' in 1984, he changed the flag, national anthem and motto as well. Out with discipline, in with progress. A subtle change, but a symbolic one.


Or how about these two in East Africa? Kenya has 'Harambee' ('Together') while Tanzania has 'Uhuru na umoja' (Freedom and unity'). Almost identical, you might think. But 'Harambee' wasn't just a slogan for Jomo Kenyatta, it became a defining ideology for Kenya: nationalism, economic development and the uniquely Kenyan institution of the 'harambee meeting', community fundraising events in which local dignitaries donate to worthy causes and politicians (pardon my cynicism) return some of the cash they have looted to the people. Meanwhile, Tanzania - then as now a lopsided federation - stresses unity. The word 'Uhuru' is important too: Tanzania's president Julius Nyerere published two collections of speeches with 'Uhuru' in the title ('Freedom and Socialism' and 'Freedom and Development')

As to why Kenya has lions on its coat of arms and Tanzania has a man and a woman, I am afraid to speculate, but the symbolic contrast is striking.

Some slogans are unintentionally ironic. Liberia's fine emblem (left) fails to mention is that only 2% or so of its population where brought there by "the love of liberty". The rest of them were probably as bewildered by the beautiful ship with the white sails as I would be if a bunch of white Baptist Americans showed up in northern England and announced they had come to settle there.

How about the choice of language? Do you choose a colonial language, or do you pick a local one (and thereby risk offending minority ethnic groups?). Most countries in West Africa seem to go with English or French, whereas Swahili rules in East Africa, maybe because it's a regional rather than a local language so there's less chance of offending someone. The British and the Dutch royal families both have French mottos, but nobody seems to care.

Sometimes national mottos resonate in unintended ways. Mali's motto is a super-idealistic "Un peuple, un but, une foi" ("One people, one goal, one faith"). At first I thought it sounded like a song by U2. Then I remembered where I had come across 'one people' before. The motto of Hitler's Germany was "Ein Volk, ein Reich, ein Führer". Thankfully, a motto does not always a people make.

Microfinance for the armchair investor

I have been a big fan of Kiva since I stumbled across their website nearly two years ago (just before a NY Times article got them widely noticed). Late-night visitors to the Kennedy School of Government's computer lab found me perched on the edge of my stool, pondering the relative merits of investing in chickens in Kenya, a bookstore in Bulgaria and cassava-grinding in Colombia. It's strangely addictive, or would be if I could remember my PayPal password.

Lately, though, I've begun to wish there were more Kivas out there, for two reasons. One, Kiva doesn't pay interest. That's fine if you only have $100 invested, but put $1,000 in and you start to notice. Two, a lot of the businesses I lend to are very small, doing very similar things. I'm all in favour of food retailers, but there is a limit to the number of them a street or market can support. I have at least 5 vegetable sellers within a 5-minute walk of my house in Accra. (That's 5 times more than I did in Cambridge, unless you count WholeFoods). Any new one would probably compress the margins of the others.

So I was excited to discover MyC4 yesterday, Denmark's answer to Kiva (with loans in euros!). MyC4 is set up for bigger loans: they pay interest, usually around 10%. This cost is passed onto borrowers, but if the loans are bigger, the operating costs fall to compensate. Best of all, the interest rate is set by auction, so the borrower gets to borrow from whichever lender offers the lowest interest rate. It's a slightly different model - more wealth creation than poverty reduction perhaps - but a welcome one, in my opinion.

I bought €100 of credit and jumped straight in. So far, MyC4 only has partners in three countries, but one of them is Côte d'Ivoire, which is exciting because they don't get a lot of microfinance. Right now I am invested in 2 Ivoirien businesses and am waiting to hear if my bid to invest in one in Uganda has been accepted.

Even with the prospect of larger loan sizes, though, the most common business model on MyC4 is "X buys Y wholesale and sells it retail. The loan will enable her/him to buy more stock." Sure, but food and clothing retail is highly competitive in most developing world cities I know, so the potential for additional profit is small.

What am I looking for, then? Three things. One, rural lending. Microfinance seems to be as scarce in rural areas as it is common in the cities (how many Ugandan microfinanciers operate outside Kampala? maybe this Kiva fellow can tell me). Small loans for fertiliser and seeds would make a huge difference to many farmers. Two, product differentiation. Three, businesses that add value to commodity items. I can get delicious mangoes and pineapples all over Ghana, but no fresh mango juice. I'll bet if you wheeled a juicer around Accra you could make some good money and undercut Coca-Cola at the same time. Good for you, good for Ghana and great for my teeth.

A really cool way to reduce fuel prices

I'm generally in favour of letting the price mechanism operate. Fuel prices are rising because demand exceeds supply, so the rising prices are a necessary signal to help us adjust to using less fuel. Subsidising fuel will just lead to shortages and postpone the inevitable; it's generally a waste of taxpayers' money.

Still, when governments jack up fuel prices by 40% over the weekend, it blows a hole in commuters' budgets (and hurts anyone who needs kerosene for cooking or heating). This happened in Côte d'Ivoire two weeks ago and I saw how bus and taxi fares immediately jumped to reflect the higher costs. Still, transport operators staged a strike: they claimed the government wasn't letting them raise fares by enough to cover the cost of fuel.

The government's response was to cut ministers' salaries in half and curtail foreign travel for government officials. The money saved will pay for a reduction in fuel tax. Fuel will still cost more than before, but only by 30%, not 40%.

Cynics might call this an election-time gimmick, but I think it's fantastic. I doubt the ministers will be thrown into poverty by the cut and it probably won't last long, but it sets a great precedent.

Who should be next? Maybe Kenya, where the government had to raise taxes to pay for their hair-raising 40 ministers (that's power sharing for you). But I would start with the European Parliament, whose members receive probably the most ludicrous travel allowances of any organization in the world. They can fly to Brussels on Ryanair for €99 but charge the round-trip business fare on, say, Air France (€500? €1,000?) and pocket the difference. The EU has already imposed a travel ban on President Mugabe and his entourage; wouldn't it be nice if we imposed it on EU parliamentarians too?

A lower-case capital

It’s not uncommon for countries to relocate their capital city: sometimes to an existing town or city, sometimes to a greenfield site. The cities thus created are as diverse as the reasons for creating them. At best, a new capital combines the vitality of any big city with a certain spacious self-confidence. Some of the world’s greatest cities (St Petersburg, Beijing) were designed as capitals, fully formed in the central planner’s (or emperor’s) mind. Washington DC may not have the lively churn of New York or Chicago, but its neoclassical grandeur sets it apart from other US cities. I have not visited Brasilia or Abuja: but whether you see these cities as bold visions of the future or a colossal waste of money, they are undoubtedly fully functioning capitals.

Other capital cities are still-born, capitals in name only. Tanzania’s parliament meets in Dodoma from time to time, but no ministries or embassies do. Burma’s junta recently relocated from chaotic, coastal Yangon (Rangoon) to a mountain village called Napyidaw, apparently at the suggestion of a fortune-teller. Strangest of all, perhaps, is Yamoussoukro, nominal capital of the Ivory Coast. 20 years after its designation, this bizarre city-village is a living monument to its creator and not much else.

Félix Houphouët-Boigny was certainly a master statesman. From the mid-1940s to his death in 1993, he was synonymous with Côte d’Ivoire, piloting his country from palm-fringed obscurity to the economic powerhouse of West Africa. The first African ever to sit in a French cabinet, Houphoët’s genius was to simultaneously convince the Ivoiriens that they were independent and the French that they were not. While Algeria, Kenya and Zimbabwe had to fight for their independence, Côte d’Ivoire was born without bloodshed. When neighbouring Ghana was convulsed by coups and economic collapse, the Ivorians took over as number one in cocoa. The national motto is hard-nosed: ‘Unité, discipline, travail.’

Houphouët ruled supreme for 33 years, buying off his opponents with cocoa farms and contracts. After he died, the falling price of cocoa and ever-growing corruption brought the Ivory Coast economic stagnation, political turmoil and eventually, tragically, civil war. But one aspect of ‘Le Vieux’s’ legacy is preserved: the largest cathedral in Africa and perhaps the world, rising out of the African bush in the middle of nowhere.


Yamoussoukro is a small village 200km north-west of Abidjan. It’s centrally located, on a main road, running through rolling hills with a pleasant climate. Houphouët was born near here in 1905 and that was why he designated this place to be capital. Nominally, it still is: the current government has no interest in the place but doesn’t want to touch his legacy. My bus from Abidjan suddenly burst onto a six-lane highway, completely empty apart from an army checkpoint, streetlights guarding both sides like silent sentinels. Outside the bus station, children and chickens played on a road as wide as the Champs-Elysées. Trucks laden with teak rumbled through on their way to the coast, lost in a vast expanse of concrete. Vast boulevards stretched in all directions, a few concrete bungalows stranded on the sides.

I saw a vast dome rising a mile away. My host, a local student and cousin of a friend in Abidjan, led me down the deserted avenue, past a mosque and a swampy lake where a teenage boy shook a single wriggling fish out of his net. As we crested the hill, the basilica loomed in front of us like a neo-Renaissance visitor from outer space. The guards were most welcoming: tour’s about to begin, they said.

The Basilique de Notre Dame de la Paix is the largest building in Africa and one of the hugest in the world. Its pews can accommodate 7,000 people, another 7,000 fit in standing. It has been full to capacity twice. The first was in 1989, when Pope John Paul II came to bless it. (At his request, the dome was made a few feet shorter than that of St Peter’s). The second was in 1993, at the funeral of its creator. On that occasion, over 200,000 people stood patiently in the grounds, which are beautifully maintained to this day. Only the Vatican and maybe Maracana stadium can compare.

The mind boggles at the megalomania that inspired this basilica in the bush and the sang-froid that permitted its financing. A simple plaque in the front pew commemorates President Houphoët ‘who gave this building to the nation’. God only knows what the nation gave him to build it. Our guide proudly recounted the details of its design (by a Lebanese) and construction (in three years, by French engineers). He did not tell us the price tag. In the past, I have marvelled at how much of Tibet’s GDP is tied up in temples or mediaeval France spent on cathedrals. But those monuments are alive: they are still at the heart of their cities, visited by the faithful as well as tourists. Save for a few weekenders from Abidjan, two young Germans (aid-workers?) and a French priest, the Basilique was empty. My friend had been a number of times; but he was Catholic. Most local people, he told me, ignored it completely.

And yet it’s staggeringly beautiful. Some dictators build mass graves or châteaux in France. This one at least gave the country something it can be proud of. Indeed, though Yamoussoukro was at the front line of Côte d’Ivoire’s ‘crise’ for 5 years, it was spared the shelling, rioting and looting. A battalion of Bangladeshi blue helmets live opposite; they didn’t look busy. Buses and trucks are running to the north again. The Hotel Président, a vast concrete pile on the edge of town, had a scattering of SUVs parked outside it. The market in the city centre was full of students eating at roadside stands. When I glanced up from my fried chicken and chips, the dome of the basilica stood in vast relief against the greying sky.

While the building may be unique, the ‘Big Man’ spirit that inspired it is not. When Houphouët died, his funeral was delayed by President Mitterrand, who reportedly had his Concorde circle above the airport for hours to make sure he was the last to arrive. Last week, President Kofuor hosted a sparkling awards ceremony for Ghana’s National Day, creating a brand-new ‘Medal of the Star of Ghana’. The first recipient: himself. As I write this in my hotel, Radio Télévision Ivoire has just devoted 30 minutes to what President Gbagbo did this weekend.

On the way back to Abidjan, my bus suddenly lurched to the side of the road. As we ground to a halt, I heard a wail of sirens and seconds later, a series of police cars flashed by at incredible speed, followed by three or four black S-Class Mercedes and a bunch of SUVs, indicators flashing. His Excellency on a visit to the North, or maybe his Prime Minister, the former rebel chief? The TV news confirmed it was the President on a 200km/h ‘peace-building’ tour. I wonder if he stopped at Yamoussoukro to pay his respects to Houphouët, who is buried in his palace, surrounded by a perimeter wall and moat. Once a day, a palace guard throws some fresh meat to the crocodiles who live in the moat. The Big Men continue eating, even after they die.

The cocoa story: part 1

I have come to Ghana to work on a project to raise the incomes of cocoa growers - already the motor of the rural economy here and in several neighbouring countries.

Ghana is the world's second-largest cocoa producer and three-quarters of a million farmers make a living from it. Unfortunately, their productivity levels are well below what is possible, even before you think about replacing the trees. Better crop management and judicious use of fertilizer can double yields in one or two years. So why hasn't it happened?

The biggest problem seems to be that most farmers can't get credit. Banks are unwilling to lend to farmers, for good reasons: repayment rates are low and there is little chance of seizing the farms to use as collateral, since most farmers don't have formal title to it. Microcredit isn't much help: the interest rates are too high and loan periods too short for agriculture.

West Africa still dominates the world market for cocoa, but Asian producers are making inroads with newer trees and much higher yields. Could cocoa go the way of coffee and oil palm, in which prices are set by cheap, high-volume production in Vietnam and Indonesia? The solution seems to be, at least in Ghana, in a flight to quality. The best soil and climate conditions, apparently. I predict that in 10 or 20 years, chocolate buyers will pay as much attention to questions of origin as wine and coffee buyers do now.